The following text is an op-ed from Founding Partner Laurie Menoud that was originally published by Net Zero Investor.
Is raising massive capital a guaranteed path to success? It can feel like it, until it isn’t.
In today’s landscape there is a lure of major capital infusions but there is much risk that comes with a cash flow surge. There is pressure to deliver quickly and at scale. Founders are often incentivized to go big, not incrementally. Startups that once operated with frugality and focus can begin acting like incumbents. They skip pilots. They over hire. They believe scale will solve product flaws or cost issues. But manufacturing isn’t a faith-based endeavor. It punishes overreach. And when delays hit, as they always do in hardware, those fixed costs become liabilities.
Take the case of an ambitious climate-tech hardware startup (name withheld) that went from lab-stage to raising over $1bn in just three years. Flush with funding, the company rushed to construct a first-of-its-kind factory, pouring nearly a billion dollars into the build before fully scaling out its technology to an intermediate scale. Within months of commissioning the site, it began missing key milestones. Early backers, some of whom had supported the company since inception, found their equity nearly worthless following a brutal recapitalization. What seemed like a unicorn moment quickly unraveled into a cautionary tale of overfunding, governance failure, and manufacturing scale-up inexperience.
It wasn’t the first time, and it won’t be the last. In March 2025, Northvolt, a European battery giant that had raised nearly $16bn, filed for bankruptcy in Sweden. Its collapse echoes the stories of Solyndra and Nikola: billion-dollar ventures that scaled too fast and underdelivered.
In the case of our unnamed startup, the downfall began with too much money, too early. Hiring hundreds of engineers and locking in long-lead equipment. The company poured resources into infrastructure that looked great on a pitch deck but didn’t hold up in practice. The burn ballooned. Timelines slipped. By mid-2024, the market shifted dramatically. Climate-tech VC funding fell 40% year-over-year in 2023, with late-stage deals suffering the steepest drop. Our startup, still months away from meaningful revenue, was back in the market—this time with far fewer options. That’s when the Series D investors, largely VC growth funds operating with a private equity mindset, proposed a pay-to-play recapitalization.
Fresh capital would come in, but only on punitive terms: new preferred shares, reverse stock splits, and full anti-dilution protections. Early backers who couldn’t, or wouldn’t, reinvest saw their stakes diluted into irrelevance. The cap table was reset. Late-stage investors got downside protection. Everyone else got wiped.
It was harsh by design, and it’s becoming a common feature of deep tech investing. These companies require massive upfront capital, but if they stumble even briefly, late-stage money prioritizes protection over partnership.
The pattern is familiar: a hype funding cycle, premature scaling, missed milestones, and a recap that safeguards the last money in at the expense of those who took the risk early.
We’ve seen this before.
Solyndra raised $1.2bn in venture and government support to commercialize its novel solar panels. The company built a $733m robotic factory and secured a $535m DOE loan guarantee. But it never reached price parity with conventional silicon solar. When Chinese manufacturers drove polysilicon prices down nearly 90%, Solyndra’s cost curve was instantly obsolete. In 2011, it filed for bankruptcy. The factory sat idle. Investors, public and private, were left with nothing.
Northvolt, once the poster child of Europe’s battery ambitions, raised over $16bn raised from strategic and institutional backers, including VW, BMW, Goldman Sachs, and various EU governments. It scaled fast. Too fast. The company launched gigafactories across three continents, hired thousands, and announced a $50bn order book. But execution lagged. BMW canceled a €2bn order in mid-2024 after Northvolt fell two years behind on deliveries. By year-end, its flagship plant was running at a fraction of its intended capacity. The CEO resigned. Restructuring failed. In March 2025, the company filed for bankruptcy protection. One of Europe’s most ambitious industrial projects became a high-profile flame out.
What unites these failures isn’t just the scale of capital raised, it’s how that capital was deployed. Abundance can erode discipline. Major capital infusions often create pressure to deliver quickly and at scale. Late-stage investors by design often accelerate this dynamic. Early-stage backers bet on vision and tolerate volatility, late-stage investors focus on risk-adjusted returns and capital preservation. Many negotiate hard for liquidation preferences, full anti-dilution, board seats, and control provisions. And when a company underperforms, they enforce these protections, often through aggressive recapitalizations. It’s not personal. It’s structural.
For founders and early investors, the consequences can be devastating. You go from controlling the mission to barely having a voice in the room. Your equity disappears.
As companies raise bigger rounds, their boards swell with new investors and political or strategic appointees. Alignment frays. Decision-making slows. In moments that demand urgency, whether to pivot, pause spending, or address execution risks, boards hesitate. By the time consensus is reached, the damage is often done.
And then there’s the misplaced confidence in big-name backers. Founders often assume that support from a major OEM, bank, or government agency will buffer them from adversity. But that support can vanish the moment you miss a deadline or blow a budget. Solyndra believed its DOE backing would protect it from market pressure. Nikola believed that marquee SPAC sponsors and corporate partners would stand by through turbulence. Northvolt believed institutional investors would keep the tap flowing. All were wrong. Big checks don’t equal long-term loyalty.
So, what’s the lesson?
Capital isn’t a moat. What matters is how effectively that capital is deployed, how well it aligns with execution capability, milestone achievement, and market validation. The best-funded companies in the world have failed because they scaled before they were ready.
Founders should resist the temptation to raise too much, too early. Oversized rounds create pressure to deploy before you’ve derisked.
And most importantly: I tell them to plan for the downturn while they still have leverage. Negotiate protective provisions early. Ensure that major governance changes, like a recap or a cram-down, require a supermajority. Build optionality into the capital plan. If things get tough, they should consider strategic investors, bridge capital, or asset sales before going straight into a punitive down round.
Because once the slide starts, it’s hard to stop. If a founder is backed into a corner, short on cash, late on milestones, and facing investors more interested in recovery than mission, they have little ability to protect themselves or their team.
Raising $1bn is an achievement. But it isn’t the goal. Success lies in what you build with it, not just how much you raise. The capital needed to decarbonize industries and transform infrastructure is immense, but without discipline, alignment, and execution, it will only accelerate failure.
